Thieves' Bazaar: Medicare Fraud

Hospitals, doctors and dealers have made Medicare the nation's sweetest crime. The feds are now trying to shutter the door.

Houston Riverside General Hospital specialized in the kind of medicine its better-heeled brethren did their best to avoid. Like treating the poor, the mentally ill, the drug-addled.

So it's no surprise that the 95-year-old nonprofit — formerly known as Houston Negro Hospital — shared the same broken finances as the people it served. Most patients couldn't pay their own way, leaving Riverside to survive off the rock-bottom reimbursement rates of Medicare and Medicaid.

At one point, it was losing $10,000 a day. That's when executives decided to cauterize the wound with a hot poker of fraud.

Sheila Jackson Lee: Texas U.S. Rep. Sheila Jackson Lee carried water for Medicare swindler Houston Riverside General Hospital.
photo by David Ortez
Sheila Jackson Lee: Texas U.S. Rep. Sheila Jackson Lee carried water for Medicare swindler Houston Riverside General Hospital.
David Feinwachs found that HMOs in Minnesota had turned Medicaid into a cash cow, making it several times more profitable than their private insurance. When he asked for more data, the state blocked him.
courtesy David Feinwachs
David Feinwachs found that HMOs in Minnesota had turned Medicaid into a cash cow, making it several times more profitable than their private insurance. When he asked for more data, the state blocked him.

In 1996, the State of Texas accused Riverside of padding fees and billing for drug rehabilitation services it never provided. Texas canceled $1 million in contracts and demanded that the hospital repay another $763,000. It also urged the feds to audit Riverside's Medicare and Medicaid payments.

Yet charges of fraud weren't enough for bureaucrats to fully close the spigot. The money continued to flow.

It would take another eight years before the state finally had enough. In 2004, it moved most of its drug-treatment contracts to more trusted providers, slashing Riverside's funding by 75 percent.

Unfortunately for the taxpayers, CEO Earnest Gibson III had friends in influential places.

Congresswoman Sheila Jackson Lee (D-Texas) demanded an investigation of the cuts, calling on Governor Rick Perry to restore the money. Perry, who had appointed Gibson to the Board of Regents at Texas Southern University, was happy to oblige.

By the time it was over, Riverside emerged with another $3 million.

It wasn't until 2011 — 15 years after the initial accusations — that law enforcement got serious. That's when the feds nailed administrator Mohammad Khan, who confessed to enriching the hospital through a kickback scheme.

He'd been paying "recruiters" $300 a head to bring Medicare patients to Riverside's six psychiatric clinics. They arrived by the van-load for daily therapy sessions they rarely qualified for or received. Medicare picked up the $116 million tab.

When the scheme was discovered, the Center for Medicaid and Medicare Services (CMS) finally halted the hospital's payments.

But in the eyes of Jackson Lee, a meager $116 million theft was hardly cause to rush to judgment. Her husband, Elwyn Lee, once served on Riverside's board. So the good congresswoman again rode to the hospital's rescue.

"Even if more harmful acts prove to be true," she wrote to CMS, "an entire institution should not be penalized by the acts of one person."

In Riverside's case, that "one person" would abruptly multiply. Kahn ratted out CEO Earnest Gibson III as his co-conspirator. The feds also nabbed Gibson's 35-year-old son, Earnest IV. He ran one of the psychiatric clinics and was charged with billing nearly $700,000 for care that "was not medically necessary and, in some cases, not provided," according to prosecutors.

Investigators discovered that, since 2005, the hospital had been swindling the feds to the tune of $22 million a year. Kahn pleaded guilty. The two Gibsons and five others await trial on charges of fraud, conspiracy and money laundering.

By this time, Jackson Lee had no choice but to dial down her patron sainthood. She refused to comment for this story.

Yet another member of Congress is happy to talk. Kevin Brady (R-Texas) has been trying to draw attention to health-care fraud in Houston since entering office in 2009. It seems that CMS, the agency charged with protecting Medicare dollars, failed to notice that the city's private ambulance services were robbing it blind.

That year, companies in Harris County, Texas, billed Medicare $62 million for emergency shuttles. By comparison, New York City received $7 million for the same services. Brady's concerns went ignored until 2011, when a Houston Chronicle series dragged the scam into the light.

Think of the Medicare program as a bank that never bothered to buy a safe. Everyone from HMOs to drug dealers has been caught robbing it time and time again, stealing the kind of money that makes the sequester look like pocket change.

While the credit-card industry uses data-mining techniques to flag fraud within minutes, CMS has allowed the most obvious schemes to run for years, rarely the wiser.

"Washington has long bragged that Medicare only has a 2 percent administrative overhead," Brady says. "But with that, we've paid a steep price in far too much fraud."

Given how often such blatant thievery goes undetected, no one's sure how much fraud there really is. Conservative estimates place the bill at $100 billion annually. The more adventurous peg the figure closer to $300 billion — three times what the feds spend on education.

It has left federal health care little more than an unlocked home, where street punks and gangsters, doctors and even states walk right in and help themselves to whatever's inside.

All You Need Is the Government and Your Imagination

The stealing has become so sweet that Medicare fraud threatens to overcome drug dealing as America's favorite quick-riches pastime. Street criminals can easily pull in $25,000 a day without carrying a gun. Throw in modest sentences for getting caught, and it's the criminal equivalent of saccharine.

Take Cuban expat Armando Gonzalez, who served five years for dealing crack. When he got out, he started several outpatient psychiatric clinics in Miami with a scheme similar to Riverside's.

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Rick Perry and Sheila Jackson Lee working togetha mayne.


great article. govt never ceases to amaze me.


Find the blog "Dentist the Menace" and you'll find stuff about Medicaid fraud from corporate dentists. There are dentists who are told by the companies to perform operations on healthy teeth on Medicaid children, as found when a Washington DC TV firm investigated Small Smiles - it probably still happens today right here in Houston


Sonja Schoenwald and her cronies are well-experienced in these kinds of matters. Check up wherever she has worked and is working now, in both North and South Carolina. Check court records for her around 1993 on in Durham, NC. 

Sincerely, CatherineTodd

Thomas9 1 Like

This shows how our government is so lacked on major multi-million dollar business crimes.  As long as you are a white collar criminal and whatever you are doing does not get major media exposure, you are good. You will not be held accountable for your actions, fines will be minor a best and jail time? forget it, you keep all the money you stole and are allowed to continue to the same time of crime or indulge in others. That is what the US government 'encourages'.  They only go after the blue collar criminal because they are easier and obvious to prosecute. No one in this country, especially the US government will hold themselves accountable for their actions. That includes the lack of action. By the govt. basically slapping people on the wrist to these types of billion dollar crimes, they are encouraging it. Nothing will change until the people take action and 'force' their state and national reps to act. Problem is most of the people across the country don't care, are too lazy and will not do anything about it (i.e. holding themselves accountable for what they should do, act!).

saffie6813 1 Like

There is a couple of BILLION in fraud mentioned in just this one article.  Multiply that out everywhere.  If Medicare would just put a billion dollars into the budget for fraud investigation and put these people in jail the plan would be solvent forever.  But even arrest does not deter these crooks because they never see a day in jail and they get to keep most of the money they have stolen.  

One a personal note, I once saw someone at the nursing home measuring everyone for "diabetic shoes"  for which I found they were charging Medicare $420 for each pair.   They looked like sneakers from Walmart to me.  

Unfortunately, we have seen these type of articles before and nothing is ever done.


Iffen The Press wants a comment from the loquacious Sistuh Stealing, all they needs is to roll up wid a camera.  She glad to shoot her mouth offen then.

Thieving_n_Thuggin 1 Like

It don't be thieving in Sister Stealah Jackson Flea's eyes, it be reparations.

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